Macau's game plan leaves many at a loss

Editorial | Mary Ma 17 Sep 2021

A person rendering loans to gamblers in Macau was quoted by Bloomberg as saying he could not see any hope in the Asian gaming mecca.

He's probably right, from his perspective, since it is now pretty clear from the Macau government's news briefing that junket operators specializing in bringing high rollers from the mainland to its casinos are no longer welcome.

Those continuing to operate for a new period beyond 2022 are expected to rely on tables on the floors and not on VIP rooms reserved for the so-called big spenders.

All existing licenses are due to expire next year. It's almost certain that, as a result of the review, casino revenues will dwindle and the Macau government's finances will be impacted.

That Macau is still pressing ahead with a fundamental review never seen before when the immediate impact on the enclave's finances is so obvious is an indication that Chief Executive Ho Iat-seng is determined to grab the chance to transform the SAR's identity from an economy relying on the gaming industry.

Fears over the future of existing operators are somewhat anticipated.

First, while it is known that the sub-concession system - via which Sands China, MGM Resorts and Melco Resorts currently operate under the full concessions of Galaxy Entertainment Group, SJM Holdings and Wynn Macau, respectively - will be abolished, the number of licenses to be made available in 2022 remains unclear.

There may be more, but there could also be fewer, meaning some may lose their license.

How will the exercise affect the US operators in Macau? The government did not say in the consultation, leaving it to everyone's imagination.

In addition to abolishing the sub-concession system, license terms will also be altered to include a period that may be shorter, as well as increased government supervision with an official sitting in the company to oversee operations.

The licensee will need official approval before distributing profits, including dividends.

Furthermore, the winners will have to diversify their business to nongambling segments and enhance employees' benefits.

If anything, the consultation is a package for the general public more than the investors.

The breadth and depth of supervision are unprecedented. This is consistent with the politics in the mainland at a time that various private economic sectors - including property, education and entertainment - are also subject to relentless clampdowns.

For example, the country's largest property developer, China Evergrande, is caught in a crippling debt crisis, leaving its creditors in total shock.

That being said, Beijing's decision to expand the Hengqin special economic zone may offer Macau choices other than casinos.

If the chief executive is known to be keen to diversify Macau's economy, the expansion of Hengqin gives him a chance to quicken the pace to shift away from an overdependence on the gaming sector, which accounts for up to 80 percent of the government's tax income and more than 55 percent of GDP.

I wonder if late gaming mogul Stanley Ho Hung-sun would be turning in his grave with the tsunami of changes.



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